posted at 12:41 pm on October 16, 2012 by Erika Johnsen

Another day, yet another example of what happens when the government tries to “create” jobs based on its own ideological-political ambitions rather than allowing the free market to function based on efficiency and consumer choice.

This latest government-sponsored (read: taxpayer-sponsored) green-energy bust comes in the form of A123 Systems, a manufacturer of lithium-ion batteries for electric cars. The company received almost $250 million in grants (which pretty much means the feds cut the battery-maker a check, and if the company does indeed go bankrupt, that cash is gone) from President Obama’s stimulus in 2009, not to mention over $140 million from the state of Michigan in the form of tax credits and subsidies. Via Bloomberg, A123 failed to make a debt payment that was due yesterday:

The company listed assets of $459.8 million and debt of $376 million as of Aug. 31 in Chapter 11 documents filed today in U.S. Bankruptcy Court in Wilmington, Delaware. Chapter 11 is the section of the Bankruptcy Code used by companies to reorganize. …

A123, which received a $249.1 million federal grant in 2009 to build a U.S. factory, needed a financial lifeline after struggling with costs from a recall of batteries supplied to Fisker Automotive Inc., the plug-in hybrid luxury carmaker. A123 announced in August that it was working on a deal with Wanxiang Group Corp., China’s largest auto-parts maker, for financing in exchange for a majority ownership stake.

As an avid free-trader, I have zero problems with a foreign company that sees an opportunity exploring the possibility of investing in an ailing company — Americans don’t have much interest in buying electric cars, but maybe China has a demand where we don’t — but it’s kind of tragically hilarious that the Obama administration so often touts their renewable-energy “investments” as avenues towards making us “energy-independent” and more competitive with China. What’s more, President Obama, DOE Secretary Chu, and then-Michigan Governor Jennifer Granholm all hailed A123 specifically as an innovator helping to bring about the future green economy of their utopian (dystopian?) visions. 63,000 jobs? Not so much (h/t Washington Examiner):

Besides the government’s brazen disregard for free-market signals and taxpayer money, boss Emeritus Michelle Malkin has reported on the company’s sketchy crony-ish ties to Democrats — not that any of this will even faze the Obama administration’s “we do what we want”-attitude. If Mitt Romney wants to go for the jugular again on “green jobs” in tonight’s debate (which, I think, he definitely should; if more taxpayers were more aware of the many frivolous ways in which the Obama administration has been “investing” billions of our dollars, I think there would be a little more outrage), he’s got a fresh tailor-made example ready to go.

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“Today, the US Taxpayers lost another $250 million because the current administration picked another loser in the so-called “green” energy sector. That won’t happen when I’m President of the United States”

We sure are spending a ton of money to kiss all of these frogs to find the Green Energy Prince. While I would prefer the government stay out at least Newt’s idea was better, put up a reward for missions accomplished. Paying for The Won’s donors’ tax write offs isn’t working out.

Kinda a shame actually, I’ve kept half an eye on A123 since before they took government money, and in all honesty their tech seems pretty good. Aside from the whole Fisker recall, my suspicion is that they tried to scale up way too fast. I’m not sure if that was just a poor business decision or something the administration pressured them to do, or whatever.

Basically, they had a decent product, but demand wasn’t high enough to support a factory that large. They needed either a more limited operation, or they needed to focus on R&D while selling licenses and patents to established manufacturers.

This is just the sort of behavior that Bush subsidized when Paulson drove him into a panic designed to save his ex-employer and coincidentally not its chief two competitors. If there was ever an industry that should have been bankrupted it was investment banking. Now Obama has repeated the experiment of corrupt business practices to the tune of trillions more, keeping parasite industries alive and well at the expense of all taxpayers, the industrial base, meaningful scientific research, national defense, the elderly and the young.

Mitt already accused the Obama administration of wasting 90 BILLION on green energy fiascos, in the last debate, I guess it’s time up the anty. Accuse him of wasting a trillion dollars on green energy scams. Make it hurt. I’m sure his people can come up with the numbers. World wide the cost has to be in the trillions, considering the costs of mal-investment and lost opportunities.

The business model that actually works is to develop a prototype, test it, market it, and then begin production, with continuous testing and updates as the market demands, improving, cutting costs, and offering something that the public demands and is willing to purchase.

The Obama model is to build a huge expensive factory, with all the latest bells and whistles, talk about pie-in-the-sky grand strategy, and spend billions before the first prototype is tested, let alone even produced…and what the public demands is meaningless…government will simply mandate that the people purchase it, regardless. Worked for ObamaCare, right?

OK, engineers, entrepreneurs and business folks out there…how many of you became successful when you built a huge production facility first and then tried to come up with a product to manufacture?

Show of hands?

Thought so.

This Obama energy thing is nothing but a huge Ponzi on our dime, paying off contributors with our cash.

Obama: Governor Romney is going to take us back to the same failed policies that got us into this mess.

Romney: Mr President, might I remind you of the $1.6B your Administration gave to LightSource, a company now bankrupt, $500M to Solyndra, also bankrupt, and just annouced today, a $249M to A123 which filled for bankruptcy. This. This, Mr. President is an example of the failed policies of yesterday that led to the government backed ecomonic collapse of the housing market. Your Administration hasn’t turned away from the behavior that led to the economic crisis you inherited, it has doubled down on it.

Erika, if the company filed for bankruptcy, then the company has already “gone bankrupt.”

Bankruptcy itself doesn’t mean that a company ceases to exist. Bankruptcy means that the courts are overseeing a restructuring (which is governed by Chapter 11 of the US bankruptcy code) or that the courts are overseeing a liquidation of the company assets (hich is governed by Chapter 7 of the US bankruptcy code).

Often companies file for bankruptcy because they don’t want creditors to ruin the value of their business (or the value of their assets) by sloppily seizing the company assets (foreclosure). If a company feels the need for bankruptcy protection, then this usually means that very little value will be left for equity holders.

Great point. It’s not my intention to spread the blame or distract from the choices made by Barry and his crony protege Chu, but, IIRC, this green energy program subsidy was started (or at least furthered) under Bush and Republicans who were, partly bandwagon, partly scared sheep, about the whole trumped up Dem/Prog/Lib?Enviro Gorebal Warmening / Climate Change farce which was foisted on us by the same government (not just Bush) apparatus that fed hundred of millions of grants to the climate science industry that created this farce. And we got that ethanol subsidy travesty to boot.

Taxpayers have been taken to the cleaners like never before with this hoax. Anyone remember how switchgrass was going to save us?

Anyway, it’s time to cut the Fed off from doing this stuff but also to cut off the research grant complex or reform it in some way so that it doesn’t create the market for these government subsidies, because it’s not just green tech graft stuff that gets rolling with the research but all sorts of niche government teat sucking.

We can call these failures, but the Ideologue-in-chief is just killing 2 birds with one stone. By taking $$$ from the American economy he’s getting more people on the Govt. dole and this green energy idiocy, can only work if oil is over $150P/Brl. So, he’s making sure to hurt the oil ind., any chance he gets.
Update for those following”How to take on the Enemy media & Win: http://paratisiusa.blogspot.com/2012/09/an-open-letter-to-those-who-should-know.html?spref=tw

“A123 Systems”? That has got to be a joke. Wouldn’t surprise me if there are teenagers out there with P.O. boxes registered to “Hyper-Global GreenTech” and “SolarSpike PowerJuice Systems” that got tens of millions from DoE.

Well, damn. No, I’m not a fan of giving money to pet projects and liberal/environmental zealot cronyism but I did take a flyer on this one as a penny stock back before Romney hammered Obama in the first debate and it looked like we were set for another four years.

There tech really is legit but they are run terribly and frankly, the demand isn’t there yet. Problem is, however, is that something doesn’t smell right about this whole deal. Of course, any time investors get their rear end handed to them, the cries of foul start up but that said, something here doesn’t add up.

We are writing to express our united support for the full consideration of the applications submitted to the Department of Energy by some of the most innovative and knowledgeable firms, collaborations and individuals from Michigan, which is home to an unparalleled expertise and experience in deploying large-scale new manufacturing technologies.

The American Recovery and Reinvestment Act included $2 billion for grants for manufacturing of advanced batteries and electric motors and electronics. The purpose of this funding is to invest in vital home-grown technologies and job creation in a new industry essential to jump start the development of a U.S. manufacturing base for batteries and to accelerate development and commercialization of reliable, safe and affordable electric drive vehicle systems. This new grant program is also viewed as a vital component of reducing dependence on foreign fuels, lowering vehicular emissions and helping vehicle manufacturers meet higher fuel economy standards.

Michigan is uniquely prepared to offer an American-led solution that meets these important goals. While Michigan’s auto industry is facing historic challenges, this is also a time of unprecedented opportunity for our highly skilled workers to take a leadership role in meeting critical national needs. Nine of the world’s top original equipment manufacturers (OEMs) and 46 of top 50 global suppliers have significant investments in our state, much of those now focused on developing zero or near-zero emission vehicles of the future. Our skilled workforce will also bring unmatched technical expertise that will give Michigan battery manufacturers a significant advantage over their competitors.

To support these manufacturers in their efforts, our state government colleagues, on a bipartisan basis, have taken aggressive action to organize our considerable research, development and manufacturing assets, including passage of unmatched state-level incentives to further leverage federal advanced energy investments. These incentives include $700 million in state tax credits for battery pack manufacturing, research and development, engineering and construction of production-scale battery plants. Utilizing these tax credits, four companies announced plans last month to invest more than $1.7 billion to launch advanced battery manufacturing in Michigan. On April 14, 2009, Governor Granholm announced the four companies awarded state refundable tax credits as:

•Johnson Controls-Saft Advanced Power Solutions (JCS), together with Ford Motor Company
•LG Chem-Compact Power, together with General Motors
•KD Advanced Battery Group, a joint venture of The Dow Chemical Company, Kokam America, Inc and Townsend Ventures LLC
•A123 Systems, together with Chrysler LLC

In addition, Michigan is already stimulating second-generation lithium-ion technology development through a Centers of Energy Excellence program, one of which includes the University of Michigan spinout Sakti3, and has formed various alliances with other academic and governmental entities including Oak Ridge National Laboratory and the U.S. Army Tank-Automotive Research, Development and Engineering Center (TARDEC). These alliances position the United States to take immediate advantage of Michigan’s strategic assets to establish the supply chain needed to support cell manufacturers, their suppliers, and vehicle OEMs. This supply chain will allow faster deployment throughout the product life cycle, from battery material development to recycling, reuse and reclamation.

In summary, Mr. Secretary, establishing a North American battery center of gravity in Michigan will significantly improve the federal government’s ability to more swiftly meet its ambitious vehicle electrification goals, and will pay dividends across the industrial Midwest through development of a strong supply chain. As the Department begins its review process, it is clear that our nation needs to ‘get it right the first time’ in deploying these recovery grant dollars. We urge you to strongly consider the importance of deploying the unmatched abilities and resources being offered to you from a state that has time and again persevered through regional and national challenges.

Taxpayers and Republicans have had enough of the waste and fraud in the Obama administration. Taxes will be lower in the Romney administration and the government wil take a big haircut. Too large and out of control. One term for Obama.

Well, there’s still a huge demand for batteries out there…why can’t they just retool and make different kinds?

Oh, I forgot about the Corporatist-Fascist angle. Now, when they have complete control such companies will no longer go bankrupt, but rather be hailed as successful examples of the New Socialism no matter how awful they are.